The Citigroup CEO salary is surely a good offer. Though it is not as high as the other banks in the big four league (Bank of America, Wells Fargo, and JPMorgan Chase), it can only improve going forward with a new CEO, Jane Fraser, calling the shots. Ms. Fraser, who has many years of experience in the banking industry, has a lot of serious work to do in correcting the mistakes of the previous helmsman, Michael Corbat.
Michael Corbat was excused from the bank’s top role and retired earlier than expected after some costly blunders the bank made under his watch. The main American banking systems regulator, the Office of the Comptroller of the Currency (OCC), found Citigroup and its management team at fault for several longstanding operational lapses. These include the failure to effectively manage risks (a recurrent issue), poor data governance policies, and internal control issues. There was even an “operational error” that led to the distribution of almost $1 billion of the bank’s funds. The regulator raised fears about the leadership capacity of the board and management teams and questioned their business style. In the end, Citigroup was fined $400 million which the bank agreed to pay as of September 2021. The bank was also instructed to draw up a concrete remediation plan.
This issue affected the Citigroup CEO salary as the board reprimanded him. He ended up taking a pay cut leaving him with $19.04 million. This amount consisted of $1.5 million in base salary and $17.5 million in stocks and incentives. The new pay represented a 20.7% reduction from the $24 million he previously received in 2019 and 2020. Aside from operational lapses, the board hinged its decision on other factors such as the poor performance of Citigroup’s stock in comparison with its peers in the big four. Ultimately, Corbat was retired to pave way for a new leadership team to come aboard. The board also immediately announced an infusion of $1 billion to boost its operational system.
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Jane Fraser took over in March 2019
Jane Fraser was selected to lead the new dispensation at Citigroup. She assumed office on the 1st of March 2019 and hit the ground running almost immediately. Her first goal is to implement plans to shedding the bank of multiple consumer assets all around the globe. This, according to her, is to allow for more focus on a few core consumer offerings and of course, the corporate services worldwide. Though she may face stiff resistance from regulators, she stated that she had already set out strategies to sort out the time-consuming and expensive internal reshuffling that may be required to achieve this.
She was handed a salary of $22.5 million for 2021 which is 31.6% of the former Citigroup CEO salary. The breakdown of her pay includes $1.33 million in base salary, $6.35 million in cash bonus, and $14.82 million in restricted stocks. The restricted stocks consist of deferred stocks worth $4.23 million with a vesting period of 4 years and performance share units (PSUs) worth $10.58 million which represents almost half of her total take-home pay. The major determinant of PSU value in a CEO’s pay is the bank’s tangible book value and return on tangible common equity over three years. Frasers’s PSU was 35% more than what Michael Corbat earned during his time.
The board justified the new Citigroup CEO salary by saying Ms. Fraser was tested and trusted. Fraser has many years of experience in the banking industry. She was previously the organization’s president and head of consumer operations, a position she held from 2020 to March 1, 2021. At the time, she was the second highest executive of the bank and earned $17.15 million as an annual wage consisting of a $500,000 base salary. The board also stated that her immediate response to issues the bank was facing the bank at the time of her ascent, and her plans for the banking industry and indeed the world at large was also instrumental in determining if the new Citigroup CEO salary. Ms. Fraser stated her desire to make Citigroup the first bank to make carbon-zero transactions. She wishes to lay a foundation to guide the bank’s policies and operations to have a green-house-free emission system by 2050.
While her plans seem very good, investors await the success of those plans or at least some proof that they will succeed. In 2021 when Corbat was still in charge, the bank’s shares fell by 2%. The shares trade at a discount to their book value amongst its other peers. Jane Fraser’s era has brought in some changes though she has had some downtimes too. The price of the bank’s stock has increased by 1% since her take over. Her tenure also saw the KBW Nasdaq Bank Index rose to 23%. The financial report for the big lender shows in the second quarter of 2022 shows the bank recorded revenues of $19.6 billion and a net income of $4.5 billion as compared to $17.8 billion and $6.2 billion respectively recorded in the same quarter last year. While the revenues increased by 11%, the net income dropped by 27%. Ms. Fraser says she and her team aren’t changing their strategies but will executive them with tact and discipline with a sense of urgency.
Jane Fraser is the first female CEO of a top Wall Street bank
There is so much attention surrounding the Citigroup CEO salary. Much of the attention may not be unconnected to her gender. Jane Fraser is the first woman CEO of a major Wall Street bank. Her steady rise to the top was enabled by the equal employment opportunity policy of Citigroup. Citigroup has been hailed across many quarters for taking the bold step of handing Ms. Fraser the top job. Many say this is long overdue not just to show that women have potential but to also encourage up-and-coming female prodigies. Ms. Fraser once stated that it would take a child’s bewilderment to prove the absurdity of the belief that a woman’s work wouldn’t be as valued as that of a man. The bank is the first, amongst others of its size, to post annual updates on its progress towards narrowing the gap between employees of both sexes and how much they are paid. The bank started doing this in 2018 and has been consistent ever since. In addition to this, the bank makes a case for other banks to follow suit in ensuring the wage gap is reduced to the barest minimum.
As of January 2021, Sara Wechter, the head of human resources at Citigroup stated that the median pay for male employees was 74% more than that of their female counterparts. She also stated that females make 99% of what males do when given the same position, title, and operating with the same years of experience. The bank seeks to bring down this gap to at least 40% and to do this, the board aims to employ more women to join the managerial and executive cadre.
However more needs to be done in improving the Citibank CEO salary. Although it’s quite a good one ad it tops many CEOs in the industry, it is lesser than the pay of the executives of the other top 4 banks. The pay of the CEOs of Goldman Sachs and Morgan Stanley was $35 million while that of the CEO of Bank of America, Brian Moynihan, was pegged at $24.5 million for 2021 until it was improved recently.